The top candlestick chart shows FXCM's USDOLLAR basket. The 10-year real rate candlestick chart is in the middle, and the bottom indicator shows the correlation coefficient (cc) between the two.
The USDOLLAR gapped on the open as Covid zero protests out of China weighed on sentiment. There is a risk of escalation and crackdown. However, the broader market pattern is still suggestive of a weaker dollar.
The green trendline shows the marking up of the USDOLLAR as the real rate appreciated. This trend then moved into a sideways distribution (red rectangle). Finally, the current leg is defined by the red trendline down, suggesting a markdown phase for the greenback.
Of interest, the real rate has dropped below its 30-week exponential moving average (blue ellipse). Moreover, the EMA has turned down, suggesting that the real rate has entered a moderation stage.
The cc is at a strong 86%. I.e. if the real rate continues to maintain below its EMA, the USDOLLAR basket is likely to remain subdued.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.